Barrow and Barrow (Child support)

[2021] AATA 4228

Barrow and Barrow (Child support) [2021] AATA 4228 (14 September 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2021/BC020794

APPLICANT:  Mr Barrow

OTHER PARTIES:  Child Support Registrar

Ms Barrow

TRIBUNAL:  Member P Jensen

DECISION DATE:  14 September 2021

DECISION:

The decision under review is set aside and, in substitution:

• Mr Barrow’s adjusted taxable income is varied to $112,813 per annum from 1 July 2019 to 6 January 2020;

• Mr Barrow’s adjusted taxable income is varied to $124,147 per annum from 7 January 2020 to 20 April 2020;

• Mr Barrow’s adjusted taxable income is varied to $80,195 per annum from 21 April 2020 to 30 June 2020;

• Mr Barrow’s adjusted taxable income is varied to $93,721 per annum from 1 July 2020 to 30 September 2021;

• Ms Barrow’s adjusted taxable income is varied to $57,696 per annum from 1 July 2020 to 23 May 2021; and

• Ms Barrow’s adjusted taxable income is varied to $44,810 per annum from 24 May 2021 to 30 September 2021.

CATCHWORDS

CHILD SUPPORT – departure determination – financial resources of both parents – just and equitable to depart – decision under review set aside and substituted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.

REASONS FOR DECISION

Introduction

1. Mr Barrow and Ms Barrow are the parents of [Child 1] who was born in 2011 and [Child 2] who was born in 2013. A child support case was registered from 14 June 2019 with what is commonly called the Child Support Agency or CSA. Each parent has been recorded as providing 50% care for both children.

2. The Child Support (Assessment) Act 1989 (“the Act”) provides for an administrative assessment of child support payable. It uses a formula which contains variables such as the parents’ adjusted taxable incomes and their percentages of care of the children.

3. From 14 June 2019 to 31 August 2019, the administrative assessment was based on Mr Barrow’s 2017-18 adjusted taxable income of $131,837 and Ms Barrow’s 2017-18 adjusted taxable income of $28,351. Mr Barrow was required to pay child support of $11,584 per annum

4. From 1 September 2019 to 6 January 2020, the administrative assessment was based on Mr Barrow’s 2018-19 adjusted taxable income of $192,381 and Ms Barrow’s 2018-19 adjusted taxable income of $38,322. Mr Barrow was required to pay child support of $14,912 per annum.

5. The CSA subsequently accepted Mr Barrow’s estimates of income of $124,147 per annum from 7 January 2020 and $80,195 per annum from 21 April 2020, and the administrative assessments were based on those estimates, subject to a re-assessment if it transpired that the estimates were under-estimates. Mr Barrow’s 2019-20 adjusted taxable income was $78,769. The administrative assessments that were based on Mr Barrow’s estimates therefore remained in force: section 64A of the Act.

6. The Act also provides for a departure from the administrative assessment in certain circumstances. Mr Barrow lodged a departure application on 9 July 2020. The CSA refused his application. He objected to that decision. An objections officer allowed his objection and varied Ms Barrow’s adjusted taxable income to $60,635 per annum from 9 July 2020 to 28 August 2020 and to $56,916 per annum from 29 August 2020 to 23 May 2021. Mr Barrow applied to the Tribunal for further review. I conducted a directions hearing on 30 July 2021 and a full hearing on 14 September 2021. Mr Barrow and Ms Barrow gave sworn evidence by conference phone. At Ms Barrow’s request, an interpreter was present during the directions hearing but it transpired that the interpreter’s services were not required. Ms Barrow was agreeable to participating in the full hearing without the services of an interpreter, and that is what occurred. After the hearing, Mr Barrow effectively applied to provide further evidence. Such applications are usually refused, but each application is assessed on its particular merits: section 30 of the Child Support Review Directions. Mr Barrow provided documentation which listed his child support payments to the CSA. Most of the payments were via deductions from his wages. Both parents had raised the same issue during the hearing and I had explained that the decision under review concerned the rate of child support payable and not the collection of child support. I decided to refuse Mr Barrow’s application to provide further evidence after the hearing.

7. Paragraph 98C(1)(b) of the Act relevantly provides that a departure decision may be made in respect of a departure application if:

   (i)... one, or more than one, of the grounds for departure referred to in [subsection 117(2)] exists; and

   (ii)... it would be:

   (A)just and equitable as regards the child, the liable parent, and the carer entitled to child support; and

   (B)otherwise proper;

   to make a particular determination under this Part; …

A ground for departure

1. Subparagraph 117(2)(c)(ia) of the Act, commonly referred to as Reason 8, provides as a ground for departure:

   that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:

   …

   (ia)because of the income, property and financial resources of either parent; …

2. When Mr Barrow lodged his departure application on 9 July 2020 he was seeking to have his rates of child support payable during 2019-20 varied. The administrative assessments during 2019-20 were based on incomes for Mr Barrow that were more than his actual 2019‑20 adjusted taxable income of $78,769. I will address that issue shortly. However, it is convenient to initially focus on 2020-21.

3. From 1 July 2020 to 30 June 2021, the administrative assessment was based on Mr Barrow’s estimate of income of $80,195 per annum. During 2020-21, Mr Barrow was employed as [an Occupation] for [Company 1]. According to his 2020-21 individual tax return, he earned $99,170, received a car allowance of $2,192 and incurred tax-deductible expenses of $7,641. At the full hearing he stated that the Australian Taxation Office (“the ATO”) had assessed his 2020-21 taxable income to be $93,721. He did not provide a copy of the ATO’s Notice of Assessment, despite having been directed to do so. However, both parents confirmed that the CSA had reconciled Mr Barrow’s estimate of income of $80,195 per annum against his actual adjusted taxable income for 2020-21. Reason 8 is not established in respect of Mr Barrow’s income and financial resources during 2020-21.

4. From 1 July 2020 to 30 August 2020, the administrative assessment was also based on Ms Barrow’s 2018-19 adjusted taxable income of $38,322. From 1 September 2020 to 30 June 2021, it was also based on her 2019-20 adjusted taxable income of $49,083. For many years, Ms Barrow has been employed on a part-time basis by [Company 2]. During 2020-21, she earned $46,391. She also received $11,545 in parenting payment during the 327 days from 1 July 2020 to 23 May 2021 (which was the day before [Child 2] turned 8), and then her parenting payment was cancelled. Her 2020-21 adjusted taxable income was $56,355

5. In response to my suggestion that Ms Barrow being assessed on incomes of $38,322 per annum and $49,083 per annum while receiving $56,355 per annum might satisfy the requirements of Reason 8, Ms Barrow submitted that I should have regard to her higher income until 23 May 2021 and her lower income from 24 May 2021. On that view, her income from 24 May 2021 to 30 June 2021 was $56,355 - $11,545 = $44,810 per annum, which represented her ongoing earnings without income support payments, and her income from 1 July 2020 to 23 May 2021 was $44,810 + ($11,545 / 327 x 365) = $57,696 per annum.

6. In the absence of a departure decision, the administrative assessment would be based on Mr Barrow’s reconciled 2020‑21 adjusted taxable income of $93,721 and Ms Barrow’s 2018‑19 adjusted taxable income of $38,322, and Mr Barrow would be required to pay child support of $6,428 per annum. Ms Barrow’s income at that time was actually $57,696 per annum, and an administrative assessment based on that income would result in Mr Barrow being required to pay child support of $4,068 per annum. From 1 September 2020, the difference in rates payable under those two scenarios would be less, but the difference would still be significant. Those circumstances as a whole constitute special circumstances which make the application of the administrative assessment unjust and inequitable. Reason 8 is established.

Just and equitable

1. The requirement to consider whether a departure would be just and equitable directs attention to what is fair to the parents and their children. Regard must be had to a variety of factors such as the needs of the children, the parents’ commitments and any hardship that would be caused by departing or not departing from the formula.

2. Mr Barrow currently resides in the ex-matrimonial home and he is paying the associated costs including the home loan repayments. The house is listed for sale. The parents have not finalised their property settlement. Mr Barrow’s household consists of himself and the two children.

3. Ms Barrow resides in rented accommodation. Her household consists of herself and the two children.

4. At the directions hearing, both parents acknowledged that both parents’ incomes and financial resources were fairly reflected for child support purposes in their adjusted taxable incomes as assessed by the ATO from time to time. In my opinion, those acknowledgements were properly made.

5. For the reasons stated above, it is appropriate to vary Mr Barrow’s adjusted taxable income to $93,721 per annum from 1 July 2020 to 30 June 2021[1] and vary Ms Barrow’s adjusted taxable income to $57,696 per annum from 1 July 2020 to 23 May 2021 and to $44,810 per annum from 24 May 2021 to 30 June 2021.

   [1]Such a variation is not strictly necessary because the administrative assessment would use that income in any event via the estimate reconciliation process. However, I consider it preferable to vary Mr Barrow’s adjusted taxable income so that it is clear as to what incomes are being used during particular periods.

6. I suggested that it might be appropriate to vary Mr Barrow’s adjusted taxable income to $93,721 per annum until 30 September 2021. Mr Barrow disagreed. He submitted that it should be varied to his base salary of $80,000 per annum, even though he has historically also received bonuses. He provided a payslip for the fortnight ending 27 August 2021. It listed base wages of $3,076.92, which equates to $3,097.92 / 14 x 365 = $80,767 per annum. It also listed year-to-date “Other Previous Earnings” of $7,166.59. Mr Barrow’s income to date during 2021-22 includes significant payments in addition to his base wage. On balance, I consider his 2020-21 adjusted taxable income to be the best evidence of his likely income during the period from 1 July 2021 to 30 September 2021.

7. Both parents agreed that it would be appropriate to vary Ms Barrow’s adjusted taxable income to $44,810 per annum from 1 July 2021 to 30 September 2021. I noted that if such a decision were made, the administrative assessment would apply from 1 October 2021 and each parent (but, most relevantly, Ms Barrow) would have the option of lodging an estimate of income from 1 October 2021.

8. As noted earlier, the main issue in this case is Mr Barrow’s rates of child support payable during 2019-20. He submitted that his income should be varied to $78,769 per annum from 1 July 2019 to 30 June 2020 for child support purposes; that was his actual income during that financial year. However, the following chronology is also relevant.

9. On 5 July 2019 the CSA wrote to Mr Barrow and informed him of the incomes that were being used to calculate the rates of child support payable. Similar letters were issued on 18 July 2019 and 15 August 2019. On 14 October 2019, Mr Barrow contacted the CSA and it relevantly noted (with minor typographical errors in the original):[2]

   [Mr Barrow] asked what the assessment moving forward, advised him current assessment is based on provisional income and asked if he could provide [an income declaration] for 18/19 financial year.

   [Mr Barrow] stated the information is currently with this accountant and stated [Ms Barrow] has advised him she had told us he started a new position and his current wages have reduced.

   Advised him of possible estimate option however also advised him we are not able to take an estimate until he provides [an income declaration] …

   Asked if he could contact his accountant and get the details and advise of [an income declaration], adv him it is in his best interest to do this asap as once we receive this information we can take an estimate of his income for 19/20 financial year and estimates commence from the date lodged and cannot be backdated.

   Cust adv he will do this.

   [2]Page 80 of the hearing papers.

10. Almost three months later, on 7 January 2020, Mr Barrow made an income declaration for 2019-20 and he provided an estimate of income, which involved two steps. He was required to state his year-to-date income and his likely future income. He stated that his income during the 190 days from 1 July 2019 to 6 January 2020 was $58,725, which equates to $58,725 / 190 x 365 = $112,813 per annum.[3] He estimated that his income from 7 January 2020 to 30 June 2020 would be $124,147 per annum. The CSA decided to accept that estimate of income from 7 January 2020. Mr Barrow objected to that decision. According to the objections officer’s written reasons, Mr Barrow objected “on the grounds that the estimate should have been backdated to 1 July 2019”.[4]

    [3]Page 94 of the hearing papers.

    [4]Page 114 of the hearing papers.

11. On 19 February 2020 the CSA wrote to Mr Barrow and addressed a number of issues that he had raised, including the following:[5]

    INCOME USED

    As previously discussed, we are not able to immediately backdate the income used in the assessment. We have legislative requirements that dictate when an income may be backdated in an assessment.

    We previously discussed with you applying for a Change of Assessment in Special Circumstances [which is more formally referred to as a departure application]. Through this process we are able to consider backdating the income used in an assessment. We recommend you call us to discuss this option if you wish to apply, however, further information and the application form can be found via our website, …

    [5]Page 110 of the hearing papers.

12. On 13 March 2020 an objections officer effectively reiterated what the CSA had told Mr Barrow on 14 October 2019: “estimates commence from the date lodged and cannot be backdated.” The objections officer disallowed Mr Barrow’s objection. Neither parent applied to the Tribunal for review of that decision.

13. On 21 April 2020 the CSA decided to accept Mr Barrow’s estimate of $80,195 per annum from 21 April 2020.

14. On 9 July 2020, Mr Barrow lodged a departure application.

15. The following matters are worth noting. Mr Barrow provided some of the incomes upon which the administrative assessments were based during 2019-20, namely the estimates of $124,147 per annum from 7 January 2020 and $80,195 per annum from 21 April 2020. He was advised of the need to provide an income declaration promptly if he wished to have the assessment based on an estimate of income, but the estimate could not be backdated, and if he wished to have a retrospective assessment, he needed to lodge a departure application. He did not promptly attend to those matters. Meanwhile, he was assessed to pay particular rates of child support payable and, in the absence of the appropriate applications by Mr Barrow, it would have been reasonable for Ms Barrow to organise her finances on the basis of the child support that Mr Barrow was required to pay. In weighing those various matters, I consider it appropriate to vary Mr Barrow’s adjusted taxable income to $112,813 per annum from 1 July 2019 to 6 January 2020. The CSA accepted the estimate of income that he provided on 7 January 2020 on that basis. Both parents had objection rights in respect of that decision. Mr Barrow objected to that decision, and Ms Barrow was a party to those proceedings. An objections officer disallowed Mr Barrow’s objection and neither parent applied to the Tribunal for review of that decision.

16. I also consider it appropriate to vary Mr Barrow’s adjusted taxable income to $124,147 per annum from 7 January 2020 and to $80,195 per annum from 21 April 2020.[6] They are the estimates that he provided, and they currently remain in place via the ordinary application of the relevant legislation as it applies to over-estimates.

    [6]Again, such variations are not strictly necessary.

17. Mr Barrow did not formally take issue with Ms Barrow’s incomes in the administrative assessment until 9 July 2020. I consider it appropriate to vary her income from 1 July 2020, and not from an earlier date.

18. At the directions hearing, Ms Barrow stated that although each parent provided 50% care to both children, she incurred the majority of some costs. I explained that if she was seeking to have the rate of child support varied on that basis, she could provide evidence of the costs that she had occurred. After the directions hearing she provided evidence of seven payments that she had made: three payments in respect of children’s activities during the Christmas holidays that totalled $141.20; one payment of $110.00 for school stationery; one payment of $144.00 in respect of [Child 2]’s [activity] which she said she paid quarterly; one payment of $72.49 for children’s clothing and one payment of $108.16 for after-school care. Those costs total $575.82. At the full hearing I asked Ms Barrow about the costs for children’s activities. She acknowledged that Mr Barrow might have incurred similar costs. In response to further questions, Ms Barrow said that she had incurred many other costs but had not provided the receipts. I asked her why she had not provided the receipts. She replied that she had been unaware that she could provide such evidence. In fact she had been told of the need to provide such evidence and she had provided such evidence in respect of seven payments. She said she could provide further evidence if given additional time to do so. I noted that Mr Barrow had lodged his departure more than one year ago. I asked if she was applying to have the hearing adjourned so that she could provide further evidence, with a view to having a second day of hearing at some later date. She did not respond directly to that question. The evidence that Ms Barrow provided does not establish that she has been incurring a disproportionate share of the children’s ordinary costs.

19. The proposed decision will reduce Mr Barrow’s overall child support liability, but not to the extent that it would have been reduced if he had been assessed on his 2019-20 adjusted taxable income of $93,721 throughout 2019-20. In my opinion, the proposed decision will strike an appropriate balance between the competing matters referred to above.

Otherwise proper

1. The requirement to consider whether a departure would be otherwise proper directs attention to what is fair to the community. It is necessary to consider the effect of any departure from the administrative assessment on entitlements to income-tested pensions, allowances and benefits. Parents rather than the community have the primary duty to maintain a child.

2. Ms Barrow receives family tax benefit in respect of the children of the assessment. Changing the child support payable by Mr Barrow will result in a more appropriate apportionment of financial responsibility between the parents and the community. Such a result would be otherwise proper.

DECISION

The decision under review is set aside and, in substitution:

• Mr Barrow’s adjusted taxable income is varied to $112,813 per annum from 1 July 2019 to 6 January 2020;

• Mr Barrow’s adjusted taxable income is varied to $124,147 per annum from 7 January 2020 to 20 April 2020;

• Mr Barrow’s adjusted taxable income is varied to $80,195 per annum from 21 April 2020 to 30 June 2020;

• Mr Barrow’s adjusted taxable income is varied to $93,721 per annum from 1 July 2020 to 30 September 2021;

• Ms Barrow’s adjusted taxable income is varied to $57,696 per annum from 1 July 2020 to 23 May 2021; and

• Ms Barrow’s adjusted taxable income is varied to $44,810 per annum from 24 May 2021 to 30 September 2021.